UBS traders charged, bank fined $1.5 billion in Libor scandal

Thu Dec 20, 2012 1:50am EST
 

By Katharina Bart and Tom Miles and Aruna Viswanatha

ZURICH/NEW YORK (Reuters) - U.S. prosecutors charged two former UBS traders with taking part in a multi-year scheme to manipulate Libor and other benchmark interest rates, making them the first individuals to be criminally accused in the international scandal.

The charges against the two traders, Tom Hayes and Roger Darin, resulted from a broad investigation into the activities of more than a dozen banks in the setting of prices for Libor and related rates.

A day after UBS agreed to pay $1.5 billion to regulators in the United States, UK and Switzerland, the Hong Kong Monetary Authority (HKMA) said the bank was being probed over its submissions of interbank rates there, raising the risk it could face more fines.

In settling with U.S., UK and Swiss authorities, UBS not only paid one of the largest fines ever imposed on a bank, its Japanese subsidiary pleaded guilty to one U.S. criminal count of fraud relating to manipulation of benchmark rates, including the yen Libor.

The Japanese subsidiary is where authorities allege much of the manipulation of interest rates occurred, as employees of the bank looked to profit on derivatives trades linked to the rates.

The bank could have more trouble in store in Asia. HKMA, Hong Kong's de facto central bank, said in a statement early Thursday in Asia that it had received information from overseas regulatory authorities about possible misconduct by UBS involving submissions for the Hong Kong Interbank Offered Rate (Hibor) and other reference rates in the region.

UBS is the second large international bank to reach a settlement with U.S. and UK authorities, and other settlements are expected to follow in the next few months. In June Barclays Plc agreed to pay $453 million in fines to settle allegations its employees attempted to manipulate Libor rates.

The investigation and it findings - that attempts to manipulate Libor were fairly widespread in the banking industry - have cast doubts on the reliability of Libor as a benchmark for setting interest rates. The probe has also raised questions about why bank regulators were slow to uncover the manipulation, which Reuters previously reported dated back to at least the late 1990s.   Continued...

 
An employee walks past a logo of Swiss bank UBS in Zurich December 19, 2012. REUTERS/Michael Buholzer